REG-88 Energy Ltd: Operational Update - Significant Progress on all Fronts <Origin Href="QuoteRef">88E.AX</Origin>

88 EnergyAnnouncement

08/06/2016 07:40

8 June 2016 
 
 Operational Update - Significant Progress on All Fronts 
 
 88 Energy Limited (“88 Energy”, “the Company”, “Operator”) (ASX,
AIM: 88E) is pleased to provide an update on Project Icewine, located onshore
North Slope of Alaska. 
 
 Highlights 
 * 
 Acreage Award Finalised for ~173,000 Additional Acres 
 * 
 88 Energy Now Holds 210,250 Acres 
 
 
* 
 Icewine#2H Well and Stimulation Design for HRZ in Final Stages 
 * 
 Landing Zone Narrowed to Two Horizons 
 
 
* 
 Official Tender Process for Icewine#2H Major Contracts to Commence in July
2016 
 * 
 Several Suitable Rigs have been Identified for Drilling of Icewine#2H 
 
 
* 
 Well Permitting on Track for Completion Ahead of Scheduled Spud in Q117 
 
* 
 Well Performance Modelling Indicates Potential for Improved Economics 
 * 
 Detail to be Provided to Market Shortly 
 
 
* 
 Integrated Petrophysical Model for Young’s and Poisson’s Validated by
Core Data 
 
* 
 2D Seismic – Initial Results from Processing and Interpretation Expected in
August 
 
 
 Finalisation of Award of Additional ~173,000 Gross Acres 
 
 Processing has been completed for the official award of 172,937 acres
successfully bid on in the State of Alaska November 2015 Licensing Round. The
Icewine Joint Venture now holds title on a total of 271,119 acres, with
210,250 acres net to 88 Energy’s 77.5% working interest. 
 
 Accumulate Energy Alaska, Inc (100% owned U.S.subsidiary of 88 Energy Ltd) is
now the fifth largest net acreage holder of any Operator on the Central North
Slope. 
 
 Icewine#2H Substantial Progress on All Fronts 
 
 The well and stimulation design for Icewine#2H are both in the final stages
of completion and are currently being fine-tuned. 
 
 In the interim, integration of the latest rock property analysis, including
Young’s Modulus and Poisson’s Ratio (stiffness, compressibility), as well
as fluid sensitivities, has resulted in a narrowing of the proposed landing
zone to two horizons. The final horizon will be selected based on the optimal
stimulated rock volume, which in turn should result in maximum flow potential.
Significantly, the results from the latest rock property analysis correlate to
the integrated petrophysics, increasing the Company’s confidence in the
validity of the model. 
 
 Projections of potential well performance and its effect on the project
economics is ongoing. Early observations indicate that the excellent source
reservoir rock characteristics in the HRZ and consequent high potential flow
rates should significantly improve the break even price for Project Icewine in
the success case scenario. Scoping economics will be provided to the market in
the coming weeks. 
 
 Operationally, good progress continues to be made with the identification of
several suitable rigs for the drilling of Icewine#2H. The official tender
process for all major contracts will commence in July. Permitting remains on
track for completion well before the scheduled spud date in Q1 2017. 
 
 2D Seismic Status 
 
 2D seismic extracts purchased from Franklin Bluffs 3D Speculative Survey: 
 * 
 Seismic interpretation of the extracted 2D lines in the vicinity of the
Icewine#2H well location is anticipated late July/early August. 
 
 
 Icewine 2D seismic acquisition 2016: 
 * 
 The Icewine 2D seismic data acquired earlier this year by Accumulate Energy
comprises a series of regional dip and strike lines spanning the majority of
the Project Icewine acreage. The 2D dataset is expected to be processed by the
end of July, with first look interpretation following in August. 
 
 
 Managing Director of 88 Energy Limited, Dave Wall commented: “The project
continues to move forward with significant progress made on all fronts. 
 
 Well planning, contracting and permitting remain on track ahead of the
scheduled spud of Icewine#2H in Q1 2017 when the productive potential of the
HRZ will be tested potentially unlocking a huge resource play on the North
Slope of Alaska. 
 
 Any conventional prospectivity indicated by the recently acquired 2D seismic
will be icing on the cake for shareholders.” 
 
 Yours faithfully 
 
 Dave Wall 
 Managing Director 
 88 Energy Ltd 
 
 Media and Investor Relations: 
 
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  88 Energy Ltd admin@ 88energy.com +61 8 9485 0990 Hartleys Limited As Corporate Advisor Mr Dale Bryan +61 8 9268 2829 Media Enquiries Tony Dawe/ Colin Hay PPR +61 8 9388 9444                                                     
                                                                                                                                                                                                                                     
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  As Nominated Adviser Mr Neil McDonald                                                                                                                                             Mr Derrick Lee                                   
  Tel: +44 (0)131 220 9771 / +44 (0)207 397 1953                                                                                                                                    Tel: +44 (0)131 220 9100 / +44 (0)207 397 8900   
 
 Project Icewine Highlights 
 
 In November 2014, the Company entered into a binding agreement with Burgundy
Xploration ( BEX ) to acquire a significant working interest (87.5%, reducing
to 78% on spud of the first well on the project) in a large acreage position
on a multiple objective, liquids rich exploration opportunity onshore Alaska,
North America, referred to as Project Icewine. In November 2015, the gross
acreage position was expanded by 172,937 acres (formal award finalised in June
2016) to 271,119 contiguous acres (210,250 acres net to the Company). 
 
 The Project is located on an all year operational access road with both
conventional and unconventional oil potential. The primary term for the State
leases is 10 years with no mandatory relinquishment and a low 16.5% royalty. 
 
 The HRZ liquids-rich resource play has been successfully evaluated based on
core obtained in the recently completed (December 2015) Icewine #1 exploration
well, marking the completion of Phase I of Project Icewine. Phase II has now
commenced, with planning for a horizontal multi-stage fracture stimulated
well, Icewine#2H, currently underway. 
 
 Figure 1: Project Icewine Location 
 
 Generous exploration incentives are provided by the State of Alaska with up
to 85% of exploration expenditure in 2015 cash refundable, dropping to 75%
until mid 2016 and thereafter 35%. 
 
 The  primary objective is an untested, unconventional liquids-rich shale
play in a prolific source rock, the HRZ shale (Brookian Sequence), that
co-sourced the largest oil field in North America; the giant Prudhoe Bay Oil
Field Complex. Internal modelling and analysis indicates that Project Icewine
is located in a high liquids vapour phase sweetspot analogous to those
encountered in other Tier 1 shale plays e.g. the Eagle Ford, Texas. 
 
 Conventional play potential can be found at Project Icewine within the same
Brookian petroleum system and shallow to the HRZ shale and includes high
porosity channel and deep water turbiditic sands. The Brookian conventional
play is proven on the North Slope; the USGS (2013) estimate the remaining oil
potential to be 2.1 billion barrels just within the Brookian sequence.
Additional conventional potential exists in the deeper Kuparuk sands and the
Ivashuk Formation. 
 
 Drilling in (2012), on the adjacent acreage to the north, confirmed that the
HRZ shales, along with the underlying Kingak & Shublik shales, were all within
the oil window which is extremely encouraging for the unconventional potential
at Project Icewine. In addition, a conventional oil discovery was reported in
the Kuparuk sandstones. 
 
 A Prospective Resources Report by DeGolyer and MacNaughton, was commissioned
by 88 Energy to evaluate the unconventional resource potential of Project
Icewine in February 2016 and was released to the market on 6 th April 2016. 
 
 About 88 Energy: 88 Energy has a 78% working interest and operatorship in
~271,000 acres onshore the prolific North Slope of Alaska (“Project
Icewine”). The North Slope is the host for the 15 billion barrel Prudhoe Bay
oilfield complex, the largest conventional oil pool in North America. The
Company, with its Joint Venture partner Burgundy Xploration, has identified
three highly prospective play types that are likely to exist on the Project
Icewine acreage – two conventional and one unconventional. The large
resource potential of Project Icewine was independently verified by leading
international petroleum resource consultant DeGolyer and MacNaughton. In
addition to the interpreted high prospectivity, the project is strategically
located on a year-round operational access road and only 35 miles south of
Pump Station 1 where Prudhoe Bay feeds into the TransAlaska Pipeline System.
The Company is currently acquiring seismic to take advantage of the globally
unique fiscal system in Alaska, which allows for up to 75% of 1H2016
exploration expenditure to be rebated in cash. The Company recently completed
its maiden well at the project, Icewine#1, with excellent results from
analysis of core obtained in the HRZ shale. A follow-up well with a horizontal
section and multi stage frac, Icewine#2H, is planned for 1Q2017. 
 


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